Supply chain efficiency of Tomato in Kathmandu valley
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Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
Research Article
Supply chain efficiency of Tomato in Kathmandu valley
Hemlal Bhandari1*, Thaneshwar Bhandari1, Krishna Prasad Timsina2 and Hari Krishna Panta1
1
Institute of Agriculture and Animal Science (IAAS), Tribhuvan University, Kathmandu, Nepal.
2
Nepal Agricultural Research Council, National Agricultural Policy Research Centre, Khumaltar,
Lalitpur, Nepal.
*Correspondence: palpalihem@yahoo.com
*ORCID: https://orcid.org/0000-0002-6934-2389
Received: September 07, 2020; Accepted: November 17, 2020; Published: January 01, 2021
© Copyright: Bhandari et al. (2021).
This work is licensed under a Creative Commons Attribution-Non Commercial 4.0
International License.
ABSTRACT
Past studies kept attention on the supply side or value chain aspects of tomato but not kept attention to the
supply chain efficiency. To measure supply-side efficiencies in tomato sub-sector, this survey research
organized an interview schedule with the randomly selected eighty households in Kirtipur, Chandragiri,
Changunarayan, and Godawori municipalities of Kathmandu valley during April to June 2018 with semi
structured questionnaire. Study estimated NRs 8,26,144/ha as net profit of tomato grown under tunnel was
nearly 44% higher compared to open field condition. Further five types of marketing channels prevailed for
tomato market were; channel first (producer-retailer-consumer), channel second (producer-wholesaler-retailer-
consumer), channel third (produce-cooperative-retailer-consumer), channel fourth (producer-collector-
wholesaler-retailer-consumer) and channel fifth (producer-wholesaler-processor-wholesaler-retailer-consumer)
but most dominant was the fourth one since 45% of the fresh tomato supplied through it especially to save time
and avoid all possible drudgery in the market. The marketing margin per kilogram of tomato was the lowest
(NRs.16.55) in the third channel and the highest (NRs. 39.2) in the fifth channel while the highest market
efficiency was 1.27 for the third channel. The producer’s share was highest for the third channel (66.33%) and
lowest for fifth channel (39.88%). followed by 1st channel (63.72%) and lowest in 5th channel (39.88%). In order
to promote a coordinated and most efficient supply chain, the study suggested the most dominant, low
marketing margin and highly efficient supply channel for tomato so that tomato producers would get a high
share. Rather than a private one, either group marketing or cooperatives are suggested to involve in fresh tomato
marketing.
Keywords: Channel, margin, marketing-efficiency, net-profit, Producers’ share
Correct citation: Bhandari, H., Bhandari, T., Timsina, K. P., & Panta, H. K. (2021). Supply
chain efficiency of Tomato in Kathmandu valley.Journal of Agriculture and Natural
Resources, 4(1), 111-119. DOI: https://doi.org/10.3126/janr.v4i1.33232
INTRODUCTION
Tomato (Lycopersicon esculentum L.) is one of the major commercial vegetable crops and is
widely grown both in the plains and hills of Nepal. It is grown up to 2500 masl however best
suited to terai region. The area under tomato cultivation in Nepal is 21,389 ha with total
production 400674 MT and productivity is 19 MT/ha (MOALD, 2018). There is still a lack of
institutions strongly dealing with market-related issues of perishable vegetables in Nepal. The
111Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
marketing situation is still in a rudimentary stage characterized by influences of supply and
demand and price realization (Shrestha, 2008). Regarding agriculture marketing in Nepal, a
general remark had been such that the traders usually tried transferring all sort of price risks
to farmers and offered low prices to them by creating monopsonistic situation, debt-ties and
cartel (Thapa et al., 1995). Tomato marketers usually move primary product without value
addition. Due to perishable nature of the products and lack of cold chain storage farmers are
compelled to sell fresh products at low price market. The promotion of new post-harvest
technologies can provide a higher return to the farmers will be easily accepted by the farmers
(Timsina and Shivakoti, 2018).
A supply chain is a system of organizations, people, activities, information, and resources
involved in moving a product or service from supplier to consumer. The efficient supply
chain requires strengthening all the levels of infrastructure such as input delivery, credit,
irrigation, procurement, reducing post-harvest losses, creation of cold store chains, starting of
processing units and marketing techniques, improving storage plants and marketing
information (Chand, 2010). Adhikari et al. (2012) reported that due to lack of value-based
outlook in the past development efforts of Nepal, the problem of oversupply existed. Same
report also focused on mismatching consumers’ expectations and uncoordinated supply chain
of Tomato in Nepal. Value chain and supply chain studies in Nepalese context have focused
supply perspective and value addition, but not kept attention in the supply chain efficiency
considering collective actions (Timsina et al., 2016, Timsina et al., 2012a, b; Shrestha et al.,
2012; Chapagain et al., 2011; FBC, 2008). This study focused to know different problems
and constraints existing in tomato marketing and to identify the efficient channel of tomatoes
marketing for its sustainability considering the market chain efficiency approach
METHODOLOGY
Selection of the study area
Researchers selected Kathmandu valley for the field survey because of increasing trend of
both tunnel and open-field tomato production reported and productivity was also higher by
37% compared to national average of 19 MT/ha (MOALD, 2018). Study selected four
municipalities of Kathmandu valley Kirtipur, Chandragiri, Godawori and Changunarayan
purposely for the study (Figure 1), and respondents of these areas were randomly selected
having at least one ropani of land for tomato cultivation. Of the samples, eighteen households
were selected from Chandragiri, fourteen from Kirtipur, twenty-six from Changunarayan, and
twenty two from Godawori municipality based on 5% of the respondents in the sampling
frame.
112Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
Figure 1: Study site
Sampling procedure and data collection
The authors used a simple random sampling method in selecting 80 sample from the
sampling frame. A survey was done from April to June 2018 to collect the primary data from
the selected respondents using a semi-structured questionnaire, focus group discussion, and
direct field observation. Using coordination schema, different variables were included in the
questionnaire and checklist and held interview schedule by visiting each respondent in their
home, office, and farm. Further data collection took place with 5 collectors, 3 processors, 5
cooperatives, 10 wholesalers, and 20 retailers as key informants of the same area. Secondary
information was collected from the published sources.
Methods and techniques of data analysis
Collected data were coded and entered into MS excel sheet and analysis was done using
Statistical Package for Social Science (V25 version) and MS-Excel.
113Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
RESULTS AND DISCUSSIONS
Ethnicity of the respondents
Table 1 depicts that respondents constitute four groups based on their caste, namely; Brahmin
and Chettri, Janajati, Dalit, and Madhesi. Out of the total respondents; majority were janajaati
(55%), followed by Bhramin and Kshetri (35%), Dalit (8.75%), and Madhesi (1.25%).
Table 1: Respondent’s ethnicity
Place Brahmin & Kshetri Janajaati Dalit Madhesi Total
Chandragiri 5 13 0 0 18
Municipality Kirtipur 4 8 2 0 14
Changunarayan 8 14 3 1 26
Godawori 11 9 2 0 22
Total 28(35) 44(55) 7(8.75) 1(1.25) 80
Note: Figures in parentheses indicate percentage Source: Field survey, 2018
Profitability analysis
Table 2: Profit (NRs/ha) and B/C ratio analysis of tomato production
Items Tunnel (A) Open field (B) Difference (A-B)
Total income 1873010±92943.39 1152939±90865.74 720070.8±22893.26**
Total cost 1046806±59613.52 687006.1±50018.28 359799.5±13214.08**
Net profit 826204±105433.7 465893.5±96479.46 360271.3±24781.21**
B/C ratios 1.79 1.68 0.11
Source: Field survey, 2018
Using two independent sample t-tests at 5 % level of significance net profit of tomato
production in tunnel (NRs. 826204/ha) was found significantly higher compared to open field
condition (NRs. 465893.5/ropani). B/C ratio also was higher in tunnel house (1.79)
compared to open field condition (1.68) suggests cultivating in a tunnel house is
comparatively profitable. The finding also supports by Abdalla, 2015 who found the B/C
ratio of tomato production in a tunnel as 1.8. Cost of tomato production in tunnel includes
depreciation cost of plastic tunnel and other fixed and variables costs as in open field
conditions.
114Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
Marketing channels
Producer
C-5
C-1
C-2 C-3 C-4
Wholesaler-1
Retailer Wholesaler Collector
Cooperative
Processor
Retailer Wholesaler
Retailer
Wholesaler-2
Retailer
Consumer
Retailer
Figure 2: Tomato supply chain in the study area Source: Field survey, 2018
Farmers primarily use five types of marketing channels as shown in Figure 2 and selling fresh
tomato in the various market outlets. Constituted as channel 1 connecting Producer- retailer-
consumer in Figure 2 was usual route for small quantity tomato suppliers. The second
channel included producer-wholesaler-retailer-consumer had a relatively higher marketing
margin compared to the first and third channels (Table 5). The third channel included
producer-cooperative-retailers-consumers was the least dominant one since very few
cooperatives were involved in tomato production and marketing. The dominant respondents
unaware of marketing through agriculture cooperatives but whoever done had the lowest
marketing margin through this channel. The fourth channel included producer-collector-
wholesaler-retailer-consumers and the fifth channel included producer-processor-wholesaler -
retailer-consumer.
Channel efficiency
Factors influencing marketing cost and marketing margin in different channels
Marketing cost per kg of tomato was found Rs. 9.91, 13.01, 9.03, 16.44 and 25.56 in channel-
1, 2, 3, 4 and 5, respectively. The shorter the channel, the lesser the marketing costs and
cheaper the commodity to the consumer (Scribid, 2010). Marketing margin included
marketing cost and reward for risk-bearing. Marketing margin found lowest in channel 3rd
followed by channel 1st and highest for channel 5th. The study showed marketing margin is
directly proportional to the length of the marketing channel.
115Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
Table 3: Cost and margins of different marketing channels of tomato
Items Channel- 1 Channel-2 Channel-3 Channel-4 Channel-5
Labor charge/wages 0.71 0.86 0.77 1.47 1.2
Room rent 0.64 0.98 0.98 1.09 1.01
Transportation 1.4 1.53 1.18 1.53 1.68
Implicit cost 4.55 6.75 4 9.05 8.3
Wastes 2.63 2.9 2.1 3.3 2.5
Bottling, ingredients - - - - 10.90
Marketing Cost 9.91 13.01 9.03 16.44 25.56
Reward for risk 7.42 9.77 7.52 12.06 13.64
Marketing Margin 17.33 22.78 16.55 28.5 39.2
Source: Field survey, 2018
Producers’ share in consumers’ price
The authors estimated producers’ share in consumers’ price 66.72%, 63.33%, 55.51%,
49.54%, and 39.88% for 1st, 3rd, 2nd, 4th, and 5th marketing channels respectively (Table 4). As
length of channel increased net profit to the producer substantially decreased. This result is
supported by Chand (2010) who found that the share of the farmer in the consumer price
worked out to only 48 percent for vegetables. Our result also in line with the conclusion of
Hailu (2016) who concluded the lowest producer share as more as marketing agents increased
in the channel. Past research also reported similar results in cumulative vegetable value chain
study in Gorkha, Dhading, Sindhupalchowk, and Kavrepalanchowk district (Bhandari, 2019).
Table 4: Producers’ share in consumers’ price in different channels
Items Channel 1 Channel 2 Channel 3 Channel 4 Channel 5
Price received by farmers 30.44 28.42 32.60 27.73 26.00
Consumer price 47.77 51.20 49.15 55.98 65.20
producer share 63.72 55.51 66.33 49.54 39.88
Source: field survey, 2018
Marketing efficiency and factors influencing ME on different channels
Table 5 illustrates that the price receive by farmers was directly proportional to marketing
efficiency but marketing cost and margin had an inverse relation with the marketing
efficiency. The finding supports by Chand (2010); Marketing cost and marketing margin of
the market channel has a negative influence on marketing efficiency. Marketing efficiency
estimated higher in channel 3rd followed by channel 1st, 2nd, 4th, and 5th.
In channel 3rd, the study investigated the involvement of agricultural cooperatives in tomato
marketing, an association of growers voluntarily to pool their production for sale. Direct
selling may create a "healthy emulation" among farmers, leading to more production
benefiting the cooperative. The cooperative facilitated collusion on the local market by
making farmers softer competitors on that market. With marketing cooperatives, farmers had
a much better price negotiation (Cakir & Balagtas, 2012) and had access to markets that they
could not access individually (Camanzi et al., 2011). Around the world, farmers increasingly
encouraged joint marketing cooperatives and cooperatives hold a significant market share in
agricultural product distribution from farms to final consumers (Deller et al., 2009). Other
advantages of cooperative marketing were: easy access to inputs, training provision within
the cooperative communities, increase group credentials in getting subsidies over the
individual enterprise.
116Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
Table 5: Average retail price, price spread, and marketing efficiency
Channels
S.N. Particulars Unit C-1 C-2 C-3 C-4 C-5
1 Retailers sale price(RP) Rs/kg 62.7 64.1 62.2 65.9 67.33
2 Total marketing cost(MC) Rs/kg 9.91 13.01 9.03 16.44 25.56
3 Total margin of intermediaries (MM) Rs/kg 17.33 22.78 16.55 28.25 39.2
4 Price received by farmers(FP) Rs/kg 30.44 28.42 32.6 27.73 26
5 Value added by marketing system (1-4) Rs/kg 32.26 35.68 29.6 38.17 41.33
Marketing efficiency=4/(2+3)= 1.12 0.79 1.27 0.62 0.40
Source: Field survey, 2018
Volume of tomato supply through different channels
Figure 3 illustrates the volume of sell on various marketing channels. It was found that
respondents used more than one channel to supply tomatoes in the markets. Out of total; 45
percent tomato was supplied in the market through the fourth channel followed by second
channel (31%), first channel (17%), third channel (5%), and fifth channel (2%). The fourth
channel was a dominant channel in the study area where collectors were actively involved in
the tomato collection that avoided all possible drudgery of post-harvest losses of the growers.
There were a few numbers of cooperatives in the research site so the quantity of supply via a
third channel was reported lower even though it was an efficient channel. The main reasons
for fewer numbers of agricultural cooperatives in the study site were due to a lack of
cooperative awareness on collective action, and the lengthy and drudgery process of
cooperative registration.
Source: Field survey, 2018
Figure 3: Quantity of tomato supply with different channels
117Journal of Agriculture and Natural Resources (2021) 4(1): 111-119
ISSN: 2661-6270 (Print), ISSN: 2661-6289 (Online)
DOI: https://doi.org/10.3126/janr.v4i1.33232
CONCLUSION
Tomato cultivation was found profitable and potential agricultural enterprise and is a
significant source of household economy. The gap between prices received by the farmers
and those paid by urban consumers is large, reflecting inefficient marketing arrangements.
Most producers were selling tomatoes through collectors especially to save time and avoid all
possible drudgery of the markets. Tomato produce is mostly collected by market agents who
sell it in organized or semi-organized markets. Unfortunately, these markets are often
controlled by a few middlemen and operated in a highly non-transparent manner. For
achieving a higher return from tomato, farmers should emphasize marketing as well as
production. To increase supply chain efficiency, collective and cooperative marketing system
should be strengthened. Farmers should be aware of the importance of collective action that
can be done by agricultural cooperatives.
Acknowledgements
The authors would like to thank National Agricultural Research and Development Fund
(NARDF) for providing thesis research grant to accomplish this study. We would like to
express their gratitude and heartiest thanks to the respondents of the study area for providing
valuable information.
Authors’ contributions
H. Bhandari conducted research and wrote the paper. T. Bhandari, K. P. Timsina, H. K. Panta
revised and finalized the paper.
Conflict of Interest
The authors declare that there is no conflict of interest regarding publication of this
manuscript.
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